Mixed Environment To Dominate

• Bargain hunting activities lifted the FBM KLCI (+1.2%) higher as the key index snapped a four-day losing streak last Friday. Still, the key index fell 3.1% W.o.W, dragged down by the sharp retracement over the past mid-week. The lower liners ended on a positive tone, while only the Properties (-0.7%) and Mining (-0.5%) sectors underperformed the broader market.

• Market breadth turned positive as gainers outnumbered decliners on a ratio of 506- to-397 stocks. Traded volumes, however, fell 23.3% to 2.20 bln shares as market participants were still wary of the volatile market condition.

• Public Bank (+1.2%) emerged as the FBM KLCI’s biggest advancer, followed by Genting Malaysia (+29.0 sen), Tenaga (+28.0 sen), Genting (+26.0 sen) and Axiata (+22.0 sen). Notable advancers on the broader market were Dutch Lady (+RM1.18), Ajinomoto (+40.0 sen), United Plantations (+32.0 sen) and Dialog (+28.0 sen). SAM Engineering & Equipment jumped 32.0 sen after delivering a strong set of quarterly earnings.

• In contrast, amongst the biggest losers on the broader market include Far East Holdings (-72.0 sen), BAT (-58.0 sen) and Malaysia Airport Holdings (-20.0 sen). Lii Hen and Bintulu Port slipped 21.0 sen and 18.0 sen respectively after their latest quarterly earnings disappointed. Meanwhile, Petronas Dagangan (-14.0 sen), MISC (-10.0 sen), DiGi (-4.0 sen), Press Metal (-3.0 sen) and Petronas Chemicals (-2.0 sen) topped the big board decliners list.

• Japanese equities rebounded from a weak start last Friday with the Nikkei (+0.1%) slipping as geopolitical tension between the U.S. and North Korea eased. The Hang Seng Index (-0.6%), however, erased all its previous session’s gain on weakness in energy and technology shares while the Shanghai Composite (- 0.4%) extended its losses. ASEAN indices, meanwhile, finished mostly lower last Friday.

• U.S. stockmarkets closed mostly lower last Friday as fresh weakness in crude oil prices dragged down energy shares. Both the Dow and S&P 500 declined 0.2% each, with the energy sector slipping 2.6% after OPEC and major oil producers were looking to increase 1.0 mln barrels of crude oil per day. The Nasdaq, however, rose 0.1% higher.

• European benchmark indices ended mostly higher as the FTSE and DAX added 0.2% and 0.7% respectively after the Euro Currency retreated against the Greenback. The CAC, however, fell 0.1% after erasing all its intraday gains. Notable losers were Spanish and Italian banks like Banco BPM SpA (-7.3%), CaixaBank SA (-3.8%) and Banco Santander SA (-2.7%).

The Day Ahead

• Malaysian stocks have confounded expectations to post a decent rebound last Friday. However, the buying is still tentative with volumes continuing to stay thin as many players still wary of the market’s direction. Still, the rebound is welcomed to break the spell of market weakness, albeit we continue to think that the general market undertone is still broadly cautious amid the lingering uncertainties over the new government’s fiscal position.

• Therefore, we think a mixed market condition could re-appear as further gains will could be met by quick profit taking actions after last Friday’s gains. At the same time, institutions are still net sellers and this could tempter the upside prospects over the near term, as with the still weak buying interest. Therefore, the 1,800 points level is still a formidable level to breach, in our view. Thereafter, the next resistance is at 1,808 level. The supports, meanwhile, are at 1,790 and 1,780 respectively.

• Similarly, we think the lower liners and broader market shares are likely to see a mixed performance as the combination of cautiousness and few available positive catalysts to keep retail interest in check.

COMPANY BRIEF

• IHH Healthcare Bhd has extended the acceptance period for its revised offer to acquire a stake in India’s Fortis Healthcare Ltd by another month. The acceptance period, which was extended until 30th June 2018, will allow the reconstituted Board of Fortis to have a full consideration and evaluation of the proposal. The terms of the revised proposal will remain unchanged.

• Separately, IHH’s 1Q2018 net profit plunged 87.8% Y.o.Y to RM57.2 mln, from RM470.1 mln a year earlier, dragged down by foreign exchange losses, higher operating expenses and an absence of gains from disposal. Revenue, however, was 6.4% Y.o.Y higher at RM2.85 bln, from RM2.68 bln last year. (The Star Online)

• Power Root Bhd reported a 4QFY18 net loss of RM9.5 mln vs. a net profit of RM9.4 mln in the same period last year as revenue declined 12.0% Y.o.Y to RM80.6 mln against RM91.6 mln in 4QFY17. The negative bottomline were a result of weaker sales and unfavourable product mix.

• Full-year net profit also tanked 78.3% Y.o.Y to RM9.4 mln against RM43.5 mln a year ago, dragged down by the latest quarterly losses, although revenue rose 6.3% Y.o.Y to RM424.6 mln, from RM399.3 mln in FY17.

• Further, the group has proposed to undertake a one-for-five bonus issue of up to 71.2 mln new shares, along with free warrants. (The Edge Daily)

• My EG Services Bhd (MyEG) has clarified that neither the company nor any of its directors was the subject of any investigation by the Malaysian AntiCorruption Commission (MACC), following allegations that the group is under investigations by the above agency. (The Edge Daily)

• Asian Pac Holdings Bhd has proposed to buy 74.0 ac. of land in Petaling Jaya worth RM300.0 mln to be used for property development. The said land will be acquired from Jiwa Murni Sdn Bhd. (The Edge Daily)

• Chemical Co of Malaysia Bhd's (CCM) 1Q2018 net profit jumped 21.3% Y.o.Y at RM10.0 mln, from RM8.2 mln in the previous corresponding period on improved sales and ongoing operational efficiency initiatives. Revenue for the quarter also increased by 14.0% Y.o.Y to RM101.4 mln, from RM88.9 mln in 1Q2017, while the group declared an interim dividend of 3.0 sen per which is payable on 29th June 2018. (The Star Online)

• Brahim's Holdings Bhd‘s 1Q2018 net loss widened to RM2.2 mln, from RM1.9 mln a year ago, following a 3.7% Y.o.Y drop in revenue to RM68.7 mln from RM71.3 mln a year earlier. The weaker earnings were a result of lower contribution from the in-flight catering. Revenue, meanwhile, also fell 4.0% Y.o.Y to RM66.5 mln, from RM69.2 mln in the same quarter last year. (The Edge Daily)

• Malaysia Steel Works (KL) Bhd 1Q2018 net profit rose 25.8% Y.o.Y to RM17.7 mln, compared with RM14.1 mln a year ago as it sold more products at higher selling prices. Revenue for the quarter jumped 24.7% Y.o.Y to RM434.8 mln vs. RM348.7 mln a year ago.

• The steel player attributed the increase in earnings to stronger domestic demand and the strengthening of local steel price, which helped boost its selling price and volume sold. (The Edge Daily)

• Tenaga Nasional Bhd (TNB) posted a 1Q2018 net profit of RM2.12 bln, on revenue of RM12.27 bln, thanks to stable electricity demand. The performance of the quarter is not comparable against any previous period due to the change in accounting year from end-August to end-December. (The Star Online)

• Sime Darby Bhd‘s 3QFY18 net profit fell significantly by 80.5% Y.o.Y to RM135.0 mln, from RM692.0 mln a year ago, due to the absence of earnings from its discontinued units - the plantation and property divisions last year. Revenue, however, increased by 5.4% Y.o.Y to RM8.29 bln, from RM7.87 bln earlier.

• Cumulative 9MFY18 net profit also lost 5.9% Y.o.Y to RM1.76 bln, from RM1.87 bln in 3QFY17 due to the aforementioned reasons, although revenue grew by 10.3% Y.o.Y to RM25.25 bln vs. RM22.89 bln last year. (The Star Online)  

Source: Mplus Research - 28 May 2018